Profit upgrade sends easyJet sky high

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EasyJet shares soared to a four-year high yesterday after the no-frills airline said it expected profits this year to be 40-50 per cent higher than the previous 12 months.

The latest bullish forecast shows the no-frills airline sector has ridden out the "bloodbath" widely predicted two years ago. Ryanair shares also gained altitude as did British Airways'.

EasyJet's guidance compares with the airline's earlier forecast that profits would be 10-15 per cent higher than in 2004. The upgrade to the forecast means easyJet's pre-tax profits are likely to come in at £115m-£126m compared with the £82.4m reported in the year to October 2005. The shares climbed 9 per cent to 425p - their highest since May 2002.

EasyJet, whose chief executive is Andy Harrison, said it expected revenue per passenger to rise by 3-4 per cent having previously forecast it would be flat for the year. However, cost reductions will not be as great as initially predicted. It now expects unit costs, excluding fuel, to fall 3 per cent rather than 5 per cent.

The airline has been forced to "wet lease" aircraft to keep up with passenger demand because of staff shortages arising from delays in security vetting of cabin crew and the need to retrain pilots for the new Airbus aircraft entering the fleet to replace Boeing jets. This will add to its costs.

Passenger numbers were up 16 per cent last month to 2.99 million after the feared slowdown in non-World Cup traffic failed to materialise. It brings the rolling 12-month total to the end of June to 32.1 million passengers.